Embedded credit done right: Why Gusto’s Payroll Bridge wins big for SMBs

For many small business owners, the hardest part of running a company is making sure everyone gets paid on time. Cash-flow volatility can turn what seems like a simple task into a logistical puzzle for SMBs. Delayed payments, unexpected expenses, and seasonal spikes all put the most critical line item on the budget at risk. It’s a stress point that’s both financial and emotional – one that Gusto decided to tackle head-on.

Enter Payroll Bridge, Gusto’s embedded line of credit powered by Parafin. Launched in September 2025, it weaves funding directly into the Gusto payroll platform SMBs already use each pay cycle. Using Gusto payroll data and Plaid-linked bank account information, Parafin evaluates eligibility and risk without traditional credit scores. Business owners can apply for, accept, and tap financing without ever leaving Gusto’s interface, turning a once multi-step process into a single, cohesive action.

Gusto’s Payroll Bridge won the Best Embedded Finance Product for SMBs at the 2025 Tearsheet SMB Finance Awards. The win reflects a product design rooted in how SMBs think, manage cash flow, and need support at the exact moment it matters.

Dan Loomis, General Manager and Head of Product at Gusto Money, explains how Payroll Bridge was conceived and built to support SMBs in their day-to-day operations.

Q: When you looked at SMB cash-flow pain, what convinced you that payroll was the place where embedded credit could make the biggest impact?

Dan Loomis: From day one, Gusto has been a payroll company. Every customer that works with us runs payroll, and over the years, we’ve built a deep understanding of what it feels like for a business owner when payroll is at risk.

When we dug into SMB cash flow data, one thing stood out: cash crunches around payroll have been rising over the past few years, with roughly one in three businesses reporting a shortage at the moment they need to run payroll. The important nuance is that these aren’t failing businesses. In most cases, they recover quickly – an invoice clears a few days later, a card settlement hits the account – but the timing mismatch shows up exactly when they have to pay their team. 

The downstream impact is severe. Each quarter, nearly 1.5 million employees of small businesses miss a paycheck. After a missed payroll, employment at those businesses drops 8%  to 10% and, on average, doesn’t recover for two years. It leaves a lasting scar on the business, the owner, and the team.

Small businesses will often tell you, “I’ll delay a vendor. I’ll skip my own paycheck. I just can’t miss payroll.” It’s existential in a way that a late bill payment isn’t. That’s what made payroll the obvious place for embedded credit to have the biggest impact — we could address the most sensitive cash flow moment, in the workflow where SMBs already trust us, using data we understand extremely well.

Q: Could you walk us through the development process of Payroll Bridge and how long it took to bring the embedded solution to SMBs?

Dan Loomis: Once we aligned on the problem, the question became: Who can help us move fast while underwriting our customers responsibly?

We spoke with a number of potential embedded partners, and Parafin stood out. They brought a strong team, a flexible platform that could be deeply embedded in our payroll experience, and an underwriting approach that could support high approval rates for the kinds of SMBs Gusto serves. Their ability to offer flexible repayment options in 4, 8, or 12 installments, paired with a three-day grace period, was a big differentiator for our customers.

From there, the process moved quickly. Working with Parafin to launch Payroll Bridge on stage at Gusto’s Showcase event took roughly four months. That timeline required an all-hands effort across product, design, engineering, legal, marketing, operations, and more. The embedded nature of the product was a huge advantage – rather than building a lending stack from scratch, we could leverage Parafin’s expertise while focusing our energy on designing a great, seamless payroll experience for our customers.

Q: In a crowded short-term financing market, what design choice in Payroll Bridge most clearly differentiates it from typical cash-flow loans?

Dan Loomis: The most important design choice we made was to be unapologetically focused on payroll.

Unlike generic short-term loans that can be used for any purpose, Payroll Bridge can only be used to fund payroll through Gusto. It allows Parafin to underwrite more confidently, and it lets us design the experience to be incredibly efficient: it’s built directly into the payroll flow and can be used instantly when an owner is about to run payroll and realizes they’re short.

On top of that, we made two other deliberate choices: 

• First, there’s no interest rate to decode — customers see a transparent fixed fee up front, and they can choose to repay over 4, 8, or 12 installments. 
• Second, Payroll Bridge offers a three-day grace period — if a business repays in full within three days, Parafin waives the entire financing fee. The product is designed to give owners a few extra days of breathing room to make payroll, without layering on stress or surprise costs.

Q: Since launch, what has surprised you the most about how businesses are using Payroll Bridge?

Dan Loomis: Even with strong data and customer interviews behind it, you never fully know if a product has fit until customers start using it. The biggest positive surprise was how quickly Payroll Bridge was adopted by our customers.

Almost immediately after launch, we saw strong adoption. Businesses were not just eligible — they were choosing to use it in exactly the moments we built it for.

We’re also seeing some of the outcomes we hoped for but didn’t want to assume. For example, among businesses enrolled in Payroll Bridge, we’re seeing fewer off-cycle payrolls compared to those not enrolled, which suggests more employees are getting paid on time rather than smaller, spread-out payments. And as we’ve expanded eligibility, repayment performance has remained strong. Parafin can extend reasonable limits to the right businesses, and those businesses are handling repayment well. That combination of adoption and better business outcomes is exactly what we want to see and how we know it’s helping small business owners facing short-term cash flow crunches. 

Q: How does Payroll Bridge fit into the bigger vision for Gusto Money over the next few years?

Dan Loomis: Payroll Bridge is the first expression of a much broader vision for Gusto Money: helping small businesses find clarity in their cash flow and giving them easy-to-use tools to exercise informed control over their money.

Embedded solutions like Payroll Bridge are a big part of that story. Partnering with specialists like Parafin lets us launch high-impact products faster, leverage their underwriting and servicing expertise, and focus on the customer experience and the overall financial operating system we’re building for SMBs.

Looking ahead, our goal is to give businesses a clearer view of money in and money out, and better tools to act on that insight. That includes investing in a more powerful cash flow dashboard so owners can see upcoming payroll, bills, and expected inflows in one place and decide whether they need to tap Payroll Bridge or adjust payment timing. It also includes improving how businesses manage expenses in Gusto: making it easier for employees to make business purchases, capture receipts automatically, and get reimbursed without friction.

Payroll Bridge is the bridge at the most critical moment: paying your team. Over the next few years, we’re building out the rest of the platform around it so that cash flow management becomes less reactive and more proactive for the millions of people who rely on small businesses for their livelihood.